THE BURNED OVER DISTRICT

But the latest bankster control bill being put forward by Senators Sherrod Brown and Diaper Dave Vitter makes the right moves in the right direction. If you pay taxes you have every reason to support this bill.

The legislation, called the Terminating Bailouts for Taxpayer Fairness Act, emerged last Wednesday; its co-sponsors are Sherrod Brown, an Ohio Democrat, and David Vitter, a Louisiana Republican. It is a smart, simple and tough piece of work that would protect taxpayers from costly rescues in the future.

This means that the bill will come under fierce attack from the big banks that almost wrecked our economy and stand to lose the most if it becomes law.

For starters, the bill would create an entirely new, transparent and ungameable set of capital rules for the nation’s banks — in other words, a meaningful rainy-day fund. Enormous institutions, like JPMorgan Chase and Citibank, would have to hold common stockholder equity of at least 15 percent of their consolidated assets to protect against large losses. That’s almost double the 8 percent of risk-weighted assets required under the capital rules established by Basel III, the latest version of the byzantine international system created by regulators and central bankers.

This change, by itself, would eliminate a raft of problems posed by the risk-weighted Basel approach. Under those rules, banks must hold lesser or greater amounts of capital against assets, depending on the supposed risks they pose. For example, holdings of United States government securities are considered low-risk and require no capital to be held against them. Securities or loans that are riskier require more of a buffer against loss.

There are many problems with this arrangement. First, the risk assessments on various types of assets rely heavily on ratings agency grades. In the housing boom, toxic mortgage securities carrying triple-A ratings were considered low-risk, too. As such, they didn’t require hefty capital set-asides.

We all know how disastrous that was. So chalk up this plus for Brown-Vitter: Eliminating risk-weights as part of a capital assessment means less reliance on unreliable ratings.

That is just one of the positive elements in this bill and you can imagine the fury that the Banksters will be mustering against it. An earlier non-binding vote on and end to Too Big To Fail showed unanimous support for the ideas in this bill, but that vote was all show and no tell.